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Paper Boys: Inside the Dark, Lucrative World of Consumer Debt Collection

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Fascinating story regarding the seedy underworld of debt collectors, debt brokers, and those who finance them.

 

 

Paper Boys: Inside the Dark, Lucrative World of Consumer Debt Collection

 

Source: New York Times, Aug 15 2014

 

http://www.nytimes.com/interactive/2014/08/15/magazine/bad-paper-debt-collector.html?partner=rss&emc=rss

 

 

 

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The author did an excellent job telling the story and educating the public. Kudos to your classmate. This story is part of a book he is publishing on the subject. He also created an interesting game to educate the public, posted as a link at the bottom of the story. Check out:  http://static.fusion.net/badpaper/

 

 

What I don't understand is why anyone in their right mind would willingly want to be in the NY Times as the subject of such a story. The investment banker tries to portray himself as a victim. However, without him the scam will disappear or just be a small time crook's game in a few isolated boiler rooms. It's the investment bankers, like the main subject of the story, who pour millions of dollars into making this the huge problem it is has become. Is the need for fame (or infamy?) so perverse that being held out to the world as the leader of a bunch of crooks worth it? For banker Aaron Seigel, apparently so. 

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Everyone should read this.  Some highlights:

 

As he soon discovered, after creditors sell off unpaid debts, those debts enter a financial netherworld where strange things can happen. A gamut of players — including debt buyers, collectors, brokers, street hustlers and criminals — all work together, and against one another, to recoup every penny on every dollar. In this often-lawless marketplace, large portfolios of debt — usually in the form of spreadsheets holding debtors’ names, contact information and balances — are bought, sold and sometimes simply stolen.

 

 

 

One imperative for Wilson and his collectors was conveying the calm, cool, unshakable understanding that they were, in fact, the rightful owners of these debts and that these debts needed to be paid promptly. It remained unsaid, of course, that this “paper” had often been purchased for as little as one penny on the dollar, and there was no mention of the fact that many of the debts that Wilson specialized in were too old to appear on a credit report or to be sued for in court. Most negative information disappears from credit reports after seven years and, depending on state law, debts may be unrecoverable through a lawsuit after as little as three years.

 

Yet Wilson’s pitch — you owe the money, and now you need to pay — was both simple and perfectly legal. In most states, you can still try to collect on a debt even after its statute of limitations has expired. As the Federal Trade Commission notes on its website: “Although the collector may not sue you to collect the debt, you still owe it. The collector can continue to contact you to try to collect.” Wilson knew the rules and used them to his advantage. As far as I could tell, that’s what Wilson loved about collections: It was a hustle, but a legitimate hustle.

 

 

 

 

 

he federal government is, at long last, starting to make a serious effort to clean up the collections industry and protect consumers like Theresa. In 2012, the Consumer Financial Protection Bureau announced that it would start supervising some of the nation’s larger debt collectors to “help restore confidence that the federal government is standing beside the American consumer.” The bureau vowed to police the nation’s largest 175 agencies, but one recent projection on the industry estimates that there will be 8,501 debt-collection firms in 2015 in the United States. And the companies engaging in the most grievous behavior — like falsely threatening lawsuits or collecting on bad paper — tend to be the smaller operators. It inevitably falls upon the state attorneys general to go after them, which means depending on overburdened officials like Karen Davis.

Photo
rattman_building.jpg
A house on Delaware Avenue that is now home to Siegel’s private-equity firm. CreditJonno Rattman for The New York Times

And so far, regulators have concentrated on debt collecting, as opposed to the buying and selling of debt, which is the source of many of the industry’s problems. As long as paper continues to be stolen, double-sold or otherwise exchanged without accurate supporting information — like statements or copies of the original signed contracts — consumers will be exploited and collectors like Siegel and Wilson will have to fend for themselves.

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Interesting to see this story gain some great attention on Facebook tonight. The NY Times posted it on its Facebook page, its been shared by many and some great comments, too. Glad to see this story get meaningful attention. 

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More importantly these paragraphs may be used as defenses and research for your case

 

 

Bank of America sold millions of dollars of charged-off debt to a company in Denver called CACH. In the sales agreement, Bank of America said it would not make “any representations, warranties, promises, covenants, agreements or guarantees of any kind or character whatsoever” about the accuracy of the account information it was selling. When Siegel bought the Package from Hudson & Keyse, the sale contract had similar wording. It stated, for example, that the seller was offering no “warranty of any kind” relating to the “validity, collectibility, accuracy or sufficiency of information” that was being sold. In other words, there might be problems with the debts, but they were being sold as is.

 

A centralized loan registry might help, and there are some in development. Mark Parsells, the chief executive of a company called Global Debt Registry, has developed a database that tracks the ownership of consumer debts once they are sold off by banks or original creditors. Each debt is assigned a “universal loan identification number,” or ULIN, which functions like a vehicle identification number on a car. When a car changes hands, its license-plate number changes, but the VIN remains the same; likewise, when a debt is bought or sold, the account number and the creditor information might change, but the ULIN would remain the same. The registry also maintains electronic records of the original data and documents associated with each debt, like statements and loan applications. If a debtor like Theresa received an inquiry from a strange collection agency or law firm, she could access the registry’s secure website and quickly verify whether this agency actually owned the debt or was authorized to collect on it.

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